THE Chamber of Mines of Zimbabwe says it is working with the authorities on new empowerment regulations for the sector after an initial plan unnerved investors and the capital-intensive industry.
BERNARD MPOFU
Zimbabwe is home to over 40 base minerals and mining is the largest foreign currency earner. According to the Chamber of Mines annual report for 2022, the mining industry grew by 10%, on the back of firm commodity prices.
The sector generated a record US$5.6 billion in export earnings compared to US$5.1 billion in 2021. In the outlook, the sector is projected to further grow by 10.4% in 2023, on the back of the on-going expansion projects and attractive mineral prices.
The government, through a statement released on 2 February 2021 announced that the mining industry was now exempted from complying with the equity threshold of the Indigenisation and Economic Empowerment Act.
“Regularisation of this policy intent remained outstanding during the period under review,” reads the annual report.
“Meanwhile, the Government is developing a new Economic Empowerment Framework that seeks to replace the current Equity Model. The Chamber is working closely with the Ministry of Industry in developing the Economic Empowerment Implementation Framework for the mining industry. The Framework is expected to be finalised before the end of 2023.”
Average capacity utilisation for the mining industry, the chamber projects, is expected to increase to 84% in 2023, compared to 81% in 2022. Mineral export earnings are expected to surpass US$6 billion in 2023.
“The potential of the mining sector continued to be undermined by foreign currency shortfalls, fragile power supply, capital shortages, high-cost structure,” the report reads.
“The Chamber of Mines engaged Authorities on these and other outstanding legislative and policy matters including Amendments to the Mines and Minerals Act, fiscal matters and Indigenisation and Economic Empowerment.”
An amendment of section 36 of the Finance Act (No. 2), 2020, promulgated in December 2020, now gives the government the prerogative to indigenise a controlling equity holding in any mineral in this country.
For perspective, the section 3(1) of the Indigenisation Act under focus allowed ministers of Mines and Finance to prescribe 51% equity stake ownership by Zimbabweans only in diamond and platinum, but now they have powers to do so over all other minerals in Zimbabwe, meaning indigenisation of mining has returned.
Local miners say the operating environment for the mining industry was challenging on the back of regular and prolonged power outages, foreign currency shortfalls, capital constraints and high-cost structure (emanating from high electricity tariffs and high royalty for some minerals).
These challenges weighed down the performance of the mining industry, with most mineral sub-sectors operating below capacity. Average capacity utilisation for the mining industry increased to 81% in 2022, from 80% in 2021. Notable increases in capacity utilisation were in respect of gold (80% to 85%) and coal (65% to 80%), while full capacity utilisation was maintained in the PGM sector.
In 2023, average capacity utilisation is expected to increase to 84%. The mining industry, the report noted remained less diversified with the top five minerals — platinum group metals, gold, high carbon ferrochrome, diamonds and chrome ore — contributed 86% of mineral exports in 2022 compared to 88% in 2021, while the top 3 accounted for 82% in 2022, compared to 83% in 2021.
“In the outlook, with improved access to capital and adequate power, gold production is projected to increase to 42 tonnes in 2023,” there report reads.
“Gold market conditions are expected to remain bullish, with gold prices anticipated to remain elevated above historical averages, while the gold payments situation is expected to remain optimal.”
